Greece can succeed with an ambitious adjustment programme to pull its recession-hit economy from the brink of default but the pace of reforms must be vigorous and “impeccable,” the OECD said yesterday.
“Greece has embarked on an ambitious adjustment programme,” the Organisation for Economic Cooperation and Development said in an economic survey.
“The key to success will be in the implementation, which will have to be impeccable,” the Paris-based organisation said.
The Greek economy, which is undergoing painstaking austerity reforms monitored by the European Union and the International Monetary Fund, is set to contract 3.5 per cent in 2011, the OECD said.
The economy is forecast to limp to growth of 0.6 per cent next year, it said.
The OECD also forecast an unemployment rate of 16 per cent in 2011 and 16.4 per cent in 2012, with inflation at 2.9 per cent and then 0.7 per cent.
Greece is currently in talks with its creditors to reduce its debt of over €350 billion by €26.1 billion under a second bailout accord agreed last month.
It hopes to achieve this by buying back or rolling over maturing debt and from lower interest on a €110-billion bailout agreed with the EU and the International Monetary Fund last year which included a quid pro quo of tough austerity measures.
Eurozone leaders last month agreed a second rescue package for Athens worth €109 billion, plus about €50 billion from the private sector up to 2014 alone.
The OECD yesterday said reforms in Greece over the past year were “impressive” and had made “unprecedented” cuts in the public deficit.
But it urged the government to “urgently” strengthen tax collection and boost privatisation to reduce the debt burden.
The Socialist administration of George Papandreou has announced a privatisation drive worth €50 billion which is being bitterly opposed by labour groups with strikes and protests.
The OECD noted that the debt-to-output ratio would peak in 2013 and fall below 60 per cent of Gross Domestic Product – the EU ceiling – in the next two decades and that the EU package announced on July 21 “should ensure reasonable interest rates” for Athens.